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The long-run real effects of banking crises: Firm-level investment dynamics and the role of wage rigidity

Carlo Wix

No 189, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: This paper studies the long-run effects of credit market disruptions on real firm outcomes and how these effects depend on nominal wage rigidities at the firm level. I trace out the long-run investment and growth trajectories of firms which are more adversely affected by a transitory shock to aggregate credit supply. Affected firms exhibit a temporary investment gap for two years following the shock, resulting in a persistent accumulated growth gap. I show that affected firms with a higher degree of wage rigidity exhibit a steeper drop in investment and grow more slowly than affected firms with more flexible wages.

Keywords: Financial Crises; Bank Lending; Real Effects; Firm Investment; Wage Rigidity; Labor Hoarding (search for similar items in EconPapers)
JEL-codes: E22 E24 E51 G01 G21 G31 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-fdg, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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https://www.econstor.eu/bitstream/10419/171923/1/1006417966.pdf (application/pdf)

Related works:
Working Paper: The Long-Run Real Effects of Banking Crises: Firm-Level Investment Dynamics and the Role of Wage Rigidity (2023) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:189

DOI: 10.2139/ssrn.3075810

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